Rupesh Parikh

Rupesh Parikh followed up on the retail segment, asking if the company expects to achieve a top-line exit rate closer to flat organic net sales by the end of the fiscal year.

Answer

Interim CFO Paul Kuehneman confirmed expectations for modest volume declines in the retail segment due to private label nuts and pricing elasticities, projecting net sales to be in the low single digits to flat for the segment by year-end.

Rupesh Parikh questioned the confidence in achieving the full-year guidance, given that the Q2 outlook implies a significant profit acceleration in the back half of the fiscal year. He also asked about the expected exit rate for the retail segment's top-line, specifically if it would be closer to flat on organic net sales by the end of the fiscal year.

Answer

Interim CEO Jeffrey M. Ettinger expressed confidence in the full-year guidance, citing the solid start and expected sequential profit improvement driven by pricing actions, Transform and Modernize benefits, SG&A savings, modest commodity improvements in the back half, and the absence of prior year's Q4 one-time discrete events. Interim CFO Paul Kuehneman reiterated expectations for the retail segment to experience modest volume declines due to private label nuts and pricing elasticities, with net sales projected to be in the low single digits to flat, consistent with earlier guidance.

Rupesh Parikh asked if management remains confident in its FY26 operating income growth target given current headwinds and inquired about recent changes in consumer behavior across retail and foodservice.

Answer

CEO Jim Snee reaffirmed confidence in the FY26 target, stating nothing has changed. EVP of Retail John Ghingo described the consumer as 'strained' but still willing to pay for value, citing strong growth in premium (Applegate), authentic (Herdez), and versatile (Jennie-O) offerings. Snee added that Hormel is holding its own in retail and structured to outperform in foodservice.

Rupesh Parikh asked about the expected interplay between gross margin and SG&A for Q2 and the balance of the year, following the margin decline in Q1. He also asked EVP John Ghingo for his perspective on the business performance versus his expectations since rejoining the company and what new opportunities he sees.

Answer

CFO Jacinth Smiley projected Q2 margins would be comparable to Q1, pressured by turkey and nut costs. CEO James Snee added that while Q2 gross margins will be down year-over-year, they should improve sequentially from Q1. EVP John Ghingo expressed that he was impressed by the company's internal transformation, encouraged by the momentum in the unified Retail business, and excited by the opportunity to apply a stronger consumer focus to Hormel's unique protein-anchored brand portfolio.

Rupesh Parikh inquired about the key variables that would lead Hormel to the low or high end of its fiscal 2025 guidance range and asked if earnings growth is achievable in the first quarter.

Answer

CEO Jim Snee expressed confidence in the guidance, citing expected growth in key retail categories like bacon and Applegate, a strong innovation pipeline, and continued momentum in Foodservice and International segments. He noted a planned double-digit increase in brand support. CFO Jacinth Smiley added that reaching the higher end of the range would depend on factors like higher volume, better product mix, an improved turkey market, and over-delivery from both the Planters brand recovery and the Transform & Modernize (T&M) initiative.

Rupesh Parikh of Oppenheimer & Co. Inc. asked how actual volumes in the quarter compared to internal expectations. He also requested any initial outlook on puts and takes for the next fiscal year, particularly concerning Planters, whole-bird turkey, and contract manufacturing.

Answer

CEO James Snee stated that volumes for Planters and contract manufacturing were lower than expected, while the decline in Turkey was largely in line with expectations. For fiscal 2025, Snee indicated it was early but highlighted expected tailwinds from a Planters rebound, continued benefits from the 'transform and modernize' initiative, and sustained momentum in key retail and international brands. He noted that the outlook for the turkey market remains too dynamic to predict.

Rupesh Parikh asked about the competitive backdrop, specifically if Freshpet has observed anything surprising, positive or negative, from competitor entries given the increased focus on the fresh category.

Answer

CEO Billy Cyr stated that the entry of many competitors across various channels was not a surprise and is seen as beneficial, as the increased attention from retailers and media investment creates a 'rising tide' for the total category. He believes this validates Freshpet's nearly two decades of investment in product quality, brand strength, manufacturing, distribution, and scale, which have effectively insulated the business from significant investments by diverse competitors. He emphasized that Freshpet is not standing still, continuing to invest in omni-channel capabilities and new manufacturing technologies to ensure a large share of the expanding fresh pet food category.

Rupesh Parikh from Oppenheimer & Co. Inc. asked Freshpet about the competitive landscape, specifically if there have been any surprising observations, positive or negative, from new competitor entries given the increased focus on the fresh pet food category.

Answer

CEO Billy Cyr stated that the entry of many competitors was not a surprise and is seen as beneficial, helping the total category through increased retailer attention and media investment. He emphasized that Freshpet's long-standing investments in product quality, brand strength, manufacturing, distribution, and scale have effectively insulated its business from significant competitive investments. Cyr affirmed Freshpet's commitment to continued innovation, including omni-channel development and new manufacturing technologies, to maintain a large share of the expanding fresh pet food category.

Rupesh Parikh asked about consumer purchasing trends across different income levels and whether there have been any noticeable shifts within Freshpet's product portfolio.

Answer

COO Nikki Beatty noted that while Freshpet is growing across all income groups and demographics, its core 'MVP' consumer base tends to skew towards higher-income households. Within the product portfolio, she highlighted that the premium Homestyle Creations line is performing exceptionally well, with new innovations in that line far exceeding initial expectations.

Rupesh Parikh from Oppenheimer & Co. Inc. inquired about consumer behavior trends across different income brackets and whether the company is observing any shifts within its product portfolio.

Answer

COO Nikki Beatty reported that Freshpet is experiencing growth across all income groups and demographics. However, she noted that the company's 'Most Valuable Pet Parents' (MVPs) are disproportionately from higher-income households. Within the portfolio, she highlighted that the premium Homestyle Creations line is performing exceptionally well and exceeding expectations.

Rupesh Parikh inquired about the health of channel inventory, the risk of future destocking, and whether the company was observing a significant slowdown or channel shift towards value retailers.

Answer

CEO William Cyr stated that inventory is in good shape across channels, with prior pet specialty distributor issues now largely resolved. He noted they don't expect significant destocking as they ship close to consumption. He confirmed that value-oriented channels like club and mass are winning due to higher foot traffic. CFO Todd Cunfer reinforced that they are shipping very close to consumption, minimizing destocking risk.

Rupesh Parikh requested an update on macroeconomic trends, including the health of the pet category, pet adoption rates, and any notable shifts in consumer behavior.

Answer

Co-Founder and President Scott Morris reported that the overall pet category is seeing modest growth around 3% when including online channels. He noted that pet adoption rates have stabilized at a more consistent pace, with a slight trend towards smaller and medium-sized dogs, which is a favorable dynamic for Freshpet.

Rupesh Parikh posed macro-level questions regarding the current state of the pet category, trends in pet adoption, and any observable shifts in consumer behavior.

Answer

Executive Scott Morris noted that while traditional brick-and-mortar pet retail growth has softened, the overall category shows growth when including online channels. He observed that pet adoption rates are stabilizing, with a slight trend towards smaller and medium-sized dogs, which is favorable for Freshpet.

Rupesh Parikh asked about the performance of Sprouts' new store openings and new store productivity, specifically noting a seemingly lighter productivity in Q4 and inquiring if this was due to timing or other factors.

Answer

CFO Curtis Valentine stated that new stores continue to perform strongly, with the 2025 vintage outperforming box economics expectations, consistent across markets. He noted that new store productivity can be 'bouncy' quarter-to-quarter due to mix and opening locations. CEO Jack Sinclair added that the consistent use of the new V6 model for over 100 stores allows for continuous learning to improve building efficiency and operational effectiveness.

Rupesh Parikh asked for an update on Sprouts' new store openings and new store productivity, specifically noting a lighter performance in Q4 and inquiring if this was due to timing or other factors.

Answer

CFO Curtis Valentine expressed satisfaction with new store performance, stating that the 2025 vintage outperformed box economics expectations, though not as strongly as 2024. He noted consistent performance across markets and reinforced confidence in the long-term algorithm. CEO Jack Sinclair added that the consistent building of new V6 stores (over 100 now) allows for continuous improvements in efficiency, from construction costs to operational effectiveness, supported by positive customer response.

Rupesh Parikh asked if the recent moderation in Sprouts' business would impact the aggressiveness of investments next year and if there were levers to pull in case of further softening. He also inquired about the capital allocation strategy, specifically if the approach to share buybacks would change given the uncertain environment and lower stock price.

Answer

Curtis Valentine, Chief Financial Officer, stated that Sprouts would continue to invest, making smart choices to allocate resources to high-priority projects. He noted that past investments in inventory and category management have created levers for gross margin gains, and ongoing work on indirect cost capability prepares them for 2026. Jack Sinclair, Chief Executive Officer, affirmed full steam ahead on new store builds, self-distribution, innovation, and loyalty/personalization. Regarding capital allocation, Curtis indicated they would be more aggressive with share repurchases depending on where the shares settle, leveraging the new $1 billion authorization opportunistically.

Rupesh Parikh inquired if the recent business moderation would impact Sprouts' investment aggressiveness for the next year and if there are levers to pull for further softening. He also asked about any changes in the approach to share buybacks given the lower stock levels and uncertain environment.

Answer

CFO Curtis Valentine stated that Sprouts would continue smart investments, leveraging prior investments in inventory and category management for gross margin gains and focusing on indirect cost capabilities. CEO Jack Sinclair affirmed full steam ahead on new store builds, self-distribution, innovation, and loyalty. Curtis Valentine added that the company would be more aggressive with share repurchases opportunistically, especially with the new $1 billion authorization.

Rupesh Parikh from Oppenheimer & Co. Inc. asked for an update on the macroeconomic environment, specifically inquiring about inflation trends within the business and any observed changes in consumer behavior.

Answer

CFO Curtis Valentine noted that inflation has been consistent quarter-to-quarter, tracking in line with CPI, with some mix benefits from organic and value packs. CEO Jack Sinclair added that the Sprouts customer base appears resilient and focused on healthy eating, showing few signs of behavioral change despite broader economic uncertainty.

Rupesh Parikh asked about new store performance, inquiring if productivity was still strong and if there were any incremental positive surprises. He also sought an update on the loyalty program, asking about any positive surprises from the rollout and if a comparable sales lift could be quantified yet.

Answer

CFO Curtis Valentine confirmed that new stores continue to perform exceptionally well, with recent vintages comping strongly, though there were no new incremental surprises. President and COO Nick Konat, with an endorsement from CEO Jack Sinclair, stated that the loyalty program is performing well in its 35-store test, meeting or exceeding KPIs for sign-ups and scans. He announced plans for a national launch in the second half of the year, starting in Arizona.

Rupesh Parikh asked about any new factors driving the accelerating comp momentum, the quarter-to-date impact from wildfires, and the outlook for continued e-commerce growth in 2025.

Answer

CFO Curtis Valentine attributed the strong comps to broad-based, balanced growth, particularly from new stores and brick-and-mortar traffic, with no material financial impact from recent weather events. President and COO Nick Konat explained that e-commerce growth is driven by product differentiation and is expected to continue outpacing the core business.

Rupesh Parikh inquired about the sustainability of the strong comparable sales momentum into the next year and asked for insights on a normalized SG&A leverage point beyond 2024.

Answer

CEO Jack Sinclair expressed confidence in continued growth, citing a large upside in customer wallet share and effective marketing. CFO Curtis Valentine added that while there were small one-time benefits, the momentum is strong and the company is confident in its 2-4% algorithmic comp in any environment. He also stated that SG&A will normalize in 2025 as one-time investments and incentive costs abate.

Rupesh Parikh inquired about the sustained momentum in membership income, Walmart's confidence in maintaining it for the fiscal year, and any additional surprises or insights regarding Walmart+ sign-ups and credit card crossover as the program continues to ramp.

Answer

CEO John Furner expressed satisfaction with the fourth quarter's membership performance, including strong credit card offers and sign-ups. He highlighted the fantastic usage rate of benefits, particularly Express Delivery and fast delivery services, which grew 60% year-over-year. Furner noted that moving Walmart+ to an enterprise level allows for expansion into more U.S. markets and that combining membership with Agentic Commerce initiatives enhances understanding of customer needs.

Rupesh Parikh inquired about the strong double-digit membership income growth, confidence in sustaining this momentum for the fiscal year, and any additional insights or surprises regarding Walmart+ sign-ups and credit card crossover.

Answer

CEO John Furner expressed satisfaction with Q4 membership performance, noting strong credit card offers, sign-ups, and high usage rates of benefits, particularly free shipping and fast delivery services, which were up 60% year-over-year. He highlighted the strategic move of Walmart+ to an enterprise level under Seth Dallaire, indicating plans for expansion into more U.S. markets. Furner also mentioned continued strength in Sam's Club membership (U.S. and China) and the synergy between membership and Agentic Commerce initiatives like Sparky and partnerships with Alphabet and OpenAI.

Rupesh Parikh of Oppenheimer & Co. Inc. asked about the health of Walmart's inventory and in-stock levels heading into the second half of the year, particularly for categories impacted by tariffs.

Answer

Walmart US CEO & President John Furner expressed confidence, noting U.S. inventory was up only 2.2% with strong sell-through in back-to-school. Sam's Club President & CEO Chris Nicholas added that for Sam's Club, inventory growth is necessary to support its accelerating, unit-driven sales growth, and that inventory turns remain healthy.

Rupesh Parikh inquired about the sustainability of the strong momentum in the health and wellness category and the performance of the new pharmacy delivery service.

Answer

Walmart U.S. CEO John Furner reported very strong results, with prescription growth over 10% excluding GLP-1s, indicating market share gains. He credited the new pharmacy delivery initiative for being helpful to customers and driving new digital user acquisition. A Sam's Club executive also noted their pharmacy business saw double-digit growth excluding GLP-1s.

Rupesh Parikh asked if the company is approaching a positive free cash flow inflection and for updated thoughts on capital allocation following the recent dividend increase.

Answer

CFO John David Rainey confirmed they feel 'really close' to both an earnings and a free cash flow inflection point. He stated that the capital allocation strategy reflects their conviction, pointing to the 13% dividend increase and plans to buy back more stock than the previous year, all while continuing to invest in the business through CapEx.

Rupesh Parikh from Oppenheimer asked about SharkNinja's outlook on the consumer category backdrop for the upcoming fiscal year, specifically whether it's expected to be similar or better than the prior year, and if U.S. market stimulus could benefit their product categories.

Answer

CEO Mark Barrocas anticipates the consumer backdrop to remain flat compared to the prior year. He acknowledged that U.S. stimulus typically boosts consumer spending but emphasized SharkNinja's focus on earning discretionary dollars through innovative products and strong value, rather than relying on external factors.

Rupesh Parikh inquired about SharkNinja's outlook on the consumer category backdrop for the upcoming fiscal year, specifically whether it is expected to be similar to or better than the prior year. He also asked if the categories could benefit from potential stimulus in the U.S. market.

Answer

Mark Barrocas (CEO) expects the consumer backdrop to be generally flat compared to the prior year. He noted that U.S. stimulus typically flows through the economy quickly, but emphasized SharkNinja's focus on earning consumers' discretionary dollars through great products and value, rather than relying on external factors.

Rupesh Parikh asked about SharkNinja's current inventory levels, specifically if the high single-digit growth in inventory is sufficient to meet underlying or stronger demand, given past inventory constraints. He also inquired about price elasticity and SharkNinja's price gaps, given that some competitors have faced challenges in raising prices.

Answer

CFO Adam Quigley confirmed healthy inventory levels, up 7-8% year-over-year in Q3, noting that strategic pre-built inventory ahead of tariffs has served the company well and that SharkNinja is confident about meeting holiday demand. CEO Mark Barrocas stated that SharkNinja has cautiously taken price increases, acknowledging consumer challenges, and emphasized that the company offers products across a wide range of price points while maintaining market-leading performance and quality.

Rupesh Parikh asked about SharkNinja's current inventory levels, whether they are sufficient to meet demand, and if past inventory constraints have been resolved. He also questioned the company's observations on price elasticity and its competitive price gaps, especially given challenges faced by other players in taking price.

Answer

CFO Adam Quigley confirmed healthy inventory levels, noting that pre-built inventory ahead of tariffs has served the company well, positioning them strongly for the holiday season without being overstocked. CEO Mark Barrocas stated that SharkNinja has taken price cautiously, acknowledging consumer challenges, but believes the company offers extraordinary value across a wide range of price points ($59-$999), maintaining market-leading performance and quality.

Rupesh Parikh asked if positive North American POS trends indicated any demand pull-forward and questioned the growth outlook for the region amid uncertainty.

Answer

CEO Mark Adam Barrocas clarified that he does not believe there was a pull-forward of demand. He stated that while the outlook for North America remains upbeat, the company's guidance accounts for potential revenue disruption from out-of-stocks. To manage tariff impacts, some new products intended for the U.S. will now launch first in Europe, a strategic reversal from the prior year.

Rupesh Parikh asked about the company's high-level assumptions for the global consumer and category backdrop in 2025. He also sought clarification on the timing of how the recently announced 10% China tariffs would flow through the P&L.

Answer

CEO Mark Adam Barrocas stated that the company's base case assumption for 2025 is a flat overall market. On tariffs, he explained the P&L impact varies, flowing through almost immediately for some products and taking 4-5 months for others with pre-built inventory, with a rough average of 60-75 days. CFO Patraic Reagan added that proactive investments in supply chain diversification and inventory are designed to 'engineer a soft landing' and that the impact is already factored into their 2025 guidance.

Rupesh Parikh asked for more details on the North America segment, specifically the dynamics between sell-in and sell-out, and whether the gap between these two metrics is expected to narrow or close by the end of the fiscal year.

Answer

Akhil Shrivastava, EVP and CFO, stated that the sell-in/sell-out gap in North America significantly reduced in Q2 compared to Q1. He attributed the remaining gap to media investments on online platforms being recorded as a sales reduction and noted substantial progress in inventory management. He clarified that North America's trends are improving sequentially, expecting positive growth in Q2, Q3, and Q4 after a negative Q1, leading to a flat full-year outlook.

Rupesh Parikh from Oppenheimer sought further clarification on the North America segment, specifically the dynamics between sell-in and sell-out, and whether the gap between these metrics is expected to narrow or close by the end of the fiscal year.

Answer

Akhil Shrivastava, EVP and CFO, explained that the significant 5-point gap between sell-in and sell-out seen in Q1 had substantially reduced in Q2 and is expected to remain lower. He attributed a persistent small gap to media investments on online platforms being recorded as sales reductions rather than OpEx, and noted significant progress in inventory management. He also clarified that North America's trends are improving, with Q2 being positive and expectations for Q3 and Q4 to be positive, leading to a flat full-year outlook after a negative Q1.

Rupesh Parikh from Oppenheimer & Co. Inc. requested more detail on the fiscal 2026 operating margin guidance, specifically the interplay between gross margin and SG&A, and which line item is expected to drive more improvement toward the double-digit margin target.

Answer

EVP and CFO Akhil Shrivastava explained that for fiscal 2026, the majority of operating margin expansion will come from SG&A, primarily through reductions in non-consumer facing costs. He noted that gross margin is expected to be flat to positive despite tariff headwinds, with more significant gross margin opportunities expected in the longer term. President and CEO Stéphane de La Faverie added that a large portion of cost savings from the PRGP are being reinvested into consumer-facing initiatives to fuel top-line growth.

Rupesh Parikh inquired about the cash flow statement, asking about potential opportunities to further reduce capital expenditures and seeking an update on the current health of the company's inventory levels.

Answer

EVP and CFO Tracey Travis confirmed that CapEx has already been reduced from initial plans and remains an area of focus, along with working capital improvements. She described inventory levels as being in 'pretty good shape' following significant progress last year, but noted a continued focus on agile planning to manage inventory and control obsolescence amid sales declines.

Rupesh Parikh inquired about the impact of shopper headwinds on Prestige Consumer Healthcare's distribution, specifically whether it reflects a consumption shift to other retailers or inventory destocking, and the expected duration of these headwinds. He also sought initial insights into fiscal year 2027, particularly regarding Clear Eyes supply and overall business performance.

Answer

Ron Lombardi, Chairman, President, and CEO, confirmed a continuation of channel shifts, with Prestige Consumer Healthcare capturing consumption in growing channels, and attributed current headwinds to inventory destocking. He noted the difficulty in predicting the duration of volatility but emphasized the company's strong positioning. For fiscal 2027, Lombardi expressed confidence in organic business performance and anticipated continued improvements in Clear Eyes supply, with more details to be provided in May.

Rupesh Parikh asked about the shopper headwinds in weaker distribution channels, inquiring if consumption is shifting to other retailers or if it's primarily inventory destocking. He also asked about the overall consumption trends, the expected duration of these headwinds, and initial thoughts on fiscal year 2027, particularly regarding Clear Eyes supply.

Answer

Ron Lombardi, Chairman, President, and CEO, confirmed that the company is observing a continuation of channel shifts, with consumption being captured in alternative retail channels. He reiterated confidence in overall consumption trends due to the company's diverse portfolio and broad distribution. Lombardi noted that predicting the duration of the headwinds is challenging due to market volatility but emphasized the company's strong position to manage through it. For fiscal year 2027, he expressed confidence in the organic business performance and anticipated continued increases in Clear Eyes supply, promising more detailed guidance in May.

Rupesh Parikh of Oppenheimer & Co. Inc. questioned the extent of retail inventory destocking, its impact on Q2, and the company's confidence in normalizing Clear Eyes supply in the second half. He also asked about recovering lost sales and the current market share impact from out-of-stocks.

Answer

CFO & COO Christine Sacco explained the retail order volatility is impacting Q2 guidance, attributing the full-year outlook change to a 60/40 split between eye care supply and retail patterns, expecting normalization in the second half. Chairman, President & CEO Ron Lombardi detailed the multi-phase strategy to stabilize Clear Eyes supply, including new suppliers and the Pillar five acquisition, expressing confidence in a significant second-half recovery that will continue into fiscal 2027. He noted that while market share has been impacted, the entire redness relief category has declined, and he expects share to recover over time.

Rupesh Parikh questioned the fiscal 2026 organic sales growth guidance of 1-2%, which is below the company's long-term target, and asked for an update on the supply recovery timeline for the Clear Eyes brand.

Answer

CFO & COO Christine Sacco explained the guidance is wider and more prudent due to macro volatility, a ~$7 million e-commerce order pull-forward from Q1, and unpredictable foreign exchange swings. Chairman, President & CEO Ron Lombardi added that the Clear Eyes supply recovery plan is unchanged, with expanded capacity and new suppliers coming online in fiscal '26, leading to a more significant recovery in the second half of the year, though quarterly shipments may remain lumpy.

Rupesh Parikh inquired about the recovery timeline for the Clear Eyes brand, current in-stock levels, and the drivers behind the Q4 gross margin outlook. He also asked for any initial perspective on the upcoming fiscal year.

Answer

CEO Ron Lombardi stated that Clear Eyes production is improving incrementally each quarter, with a more significant supply increase expected in the second half of fiscal 2026. CFO and COO Christine Sacco attributed the anticipated Q4 gross margin increase to the timing of various cost-saving initiatives and noted the company feels good about its business momentum heading into the next fiscal year.

Rupesh Parikh inquired about the outlook for the Clear Eyes and Summer's Eve brands, specifically asking for a timeline on resolving the Clear Eyes supply chain issues. He also asked a follow-up question regarding the potential business impact from the recent trend of drugstore closures.

Answer

CEO Ron Lombardi addressed both topics. Regarding Clear Eyes, he stated that sales are expected to improve sequentially in Q3 as retail inventory levels hit their low point, and the company is actively working to strengthen the supply chain for the long term. For Summer's Eve, he noted the brand's performance was flat in Q2, marking progress toward growth, and highlighted a recent market share gain for the first time in three years. On the topic of drugstore closures, Lombardi explained that the anticipated level of closures is consistent with recent years and is already factored into their business outlook, emphasizing that Prestige is channel-agnostic due to consistent margins across retailers.

Rupesh Parikh asked for an update on Touchland's international expansion in Canada and the Middle East, the planned phasing of future international growth, and whether the brand could eventually reach 100+ countries, similar to Hero.

Answer

Rick Dierker (CEO) stated that Touchland's international performance is meeting or exceeding expectations. Brian Buchert (EVP of Strategy, M&A, and Business Partnerships) and Rick Dierker explained that while there's significant global demand, expansion is purposeful and selective regarding channel partners due to regulatory challenges and brand cachet. They aim for a handful of new markets this year, with the long-term potential for 100+ countries, but with a more deliberate approach.

Rupesh Parikh inquired about the performance of Touchland's international expansion in Canada and the Middle East, the phasing of future international growth, and the potential to reach 100+ countries similar to Hero.

Answer

CEO Rick Dierker stated that Touchland's international business is hitting or beating expectations. EVP of Strategy, M&A, and Business Partnerships Brian Buchert added that the company is working on regulatory groundwork to expand to 20-40 countries, emphasizing a purposeful and selective approach to partners and channels, with regulatory challenges being a key factor. He noted that while 100+ countries are potentially achievable long-term, the focus is on careful selection.

Rupesh Parikh from Oppenheimer & Co. Inc. asked for a quantification of the headwind from retailer destocking in the quarter. He also inquired about the primary strategic priorities for the newly acquired Touchland business for the remainder of the year.

Answer

President and CEO Rick Dierker quantified the destocking impact as a 100 basis point drag in Q2, down from 300 basis points in Q1, expecting a slight impact going forward. For Touchland, Dierker highlighted priorities including driving household penetration from a low base (6%), launching new fragrances, expanding the body mist product, and pursuing international growth.

Rupesh Parikh inquired about the updated organic sales growth guidance by segment and whether the international business met expectations in Q1. He also asked for an outlook on the promotional environment given the softer category trends.

Answer

Executive Richard Dierker confirmed that international performance was in line with expectations. CFO Lee McChesney provided the segment outlook, noting continued international growth with some macro pressure, slightly better SPD performance, and a domestic business performing similarly to Q1 in Q2 before improving in the back half. Dierker added that promotions in laundry and litter were stable, but could intensify if categories remain flat.

Rupesh Parikh asked about the vitamin business, seeking details on the path to stabilization following the impairment charge and whether any 'green shoots' of recovery were visible.

Answer

CEO Matthew Farrell stated that while packaging and messaging updates are complete, the key to stabilization in 2025 will be meaningful product innovation, which has not yet hit the market. CFO Rick Dierker added that the core focus is on product reformulations. He noted some positive signs where price gap adjustments drove unit growth, and Farrell highlighted that the L'IL CRITTERS brand has been responsive and gained some share.

Rupesh Parikh inquired about the current promotional backdrop and expectations for the rest of the year, as well as the nature of the consumer spending slowdown observed in June and July.

Answer

Matthew Farrell (executive) clarified that recent promotional activity in laundry and litter was driven by specific competitors rather than a broad increase. He confirmed a consumer spending slowdown in June and July across categories, attributing it to lapping price increases and general consumer weariness. Richard Dierker (CFO and Head of Business Operations) added that this deceleration was broad-based.

Rupesh Parikh asked about the gross margin line, noting improvements over the last two to three quarters, and sought insights into the Q4 outlook and expectations for further improvement. He also inquired about the GLP-1 conversation, specifically the enthusiasm for the pill format and its potential as a bigger tailwind for next year.

Answer

President and CFO Sharon McCollam advised modeling Q4 gross margin more like Q2, explaining that an exceptionally strong Q3 pharmacy business (driven by value-added services and flu/COVID fears) shifted incremental profit from Q4 to Q3, and Q4 pharmacy margin is typically not as strong. Regarding GLP-1s, CEO Susan Morris agreed it could be more of a tailwind with increased accessibility. Sharon McCollam clarified that while the pill version is not broadly used yet and depends on side effects, it is not expected to have a material impact on pharmacy EBITDA in the short term, primarily benefiting patients on the top line.

Rupesh Parikh asked about the gross margin trend, noting improvements over the last two to three quarters, and sought an outlook for Q4, including expectations for further improvement. He also inquired about the team's thoughts on the GLP-1 pill format and its potential as a bigger tailwind for next year.

Answer

President and CFO Sharon McCollam indicated that Q4 gross margin is expected to be more similar to Q2, as Q3 saw an exceptionally strong pharmacy business with incremental profit due to an acceleration of flu and COVID-related services, which typically occurs in Q4. CEO Susan Morris confirmed that the GLP-1 pill format could absolutely be more of a tailwind moving forward due to increased accessibility. Sharon McCollam added that while the pill form is beneficial for patients, it is not expected to have a material impact on pharmacy EBITDA in the short term.

Rupesh Parikh inquired about the performance of the retail media collective versus expectations and asked about consumer behavior, particularly regarding the impact of SNAP legislation.

Answer

CEO Susan Morris stated that the media collective's growth is outpacing the industry, with significant progress in providing faster feedback to vendors and increasing digital inventory. Regarding SNAP, Morris and President & CFO Sharon McCollam noted the company's lower penetration and the long implementation ramp for new legislation, anticipating no material short-term impact. Morris added that consumers continue to seek value, driving sales in promotions and own brands.

Rupesh Parikh asked for potential reasons behind the industry-wide sales slowdown in December and inquired about the gross margin outlook for the fourth quarter.

Answer

CEO Vivek Sankaran suggested the December slowdown was likely linked to a shorter holiday shopping window amid a cautious consumer environment. President and CFO Sharon McCollam indicated that Q4 gross margin drivers would mirror Q3, with negative mix shift from growing pharmacy and digital sales being offset by ongoing productivity initiatives and benefits from shrink-reduction technology.

Rupesh Parikh asked about the dynamics of SG&A leverage, specifically how higher healthcare costs prevented leverage this quarter, and the ongoing runway for productivity improvements.

Answer

Gary Millerchip, Chief Financial Officer, explained that SG&A was impacted by employee wage investments, extended operating hours, higher healthcare costs (growing faster than sales), and a four-basis-point tax assessment charge. He stated that without the tax charge and healthcare costs, SG&A would have shown mid-single-digit positive leverage. Looking ahead, he expects continued wage and operating hour costs, potential ongoing higher healthcare costs, but no repeat of the tax charge, suggesting that mid-single-digit sales growth should enable SG&A leverage.

Rupesh Parikh asked about the dynamics of higher healthcare costs preventing SG&A leverage in the quarter and the runway for productivity improvements.

Answer

Gary Millerchip (CFO, Costco Wholesale Corporation) explained that SG&A was negatively impacted by wage investments, extended operating hours, higher healthcare costs (growing faster than sales), and a prior-year tax assessment. He stated that without the tax charge and healthcare costs, SG&A would have shown mid-single-digit positive leverage, and the team's productivity improvements have largely offset other headwinds, maintaining the need for mid-single-digit sales growth to leverage SG&A.

Rupesh Parikh asked about the P&L impact of Costco's incremental operating hours, specifically whether it's expected to be a net benefit in the upcoming fiscal year, and about new efforts in alternative revenue streams beyond media campaigns.

Answer

EVP & CFO Gary Millerchip confirmed that the incremental hours are expected to be a net benefit, with positive sales lift and effective SG&A management by operators. Regarding alternative revenue, Millerchip stated it's broader than media, including financial services (credit card, Buy Now, Pay Later with Affirm) and the successful travel business. For media, the focus is on building capabilities for targeted messaging and proving concept value with suppliers.

Rupesh Parikh asked about the P&L impact of the incremental operating hours, specifically if it's expected to be a net benefit, and inquired about new efforts in alternative revenue streams, including media campaigns.

Answer

CFO Gary Millerchip confirmed that the extended hours are expected to be a net benefit, with positive sales lift and effective SG&A management by operators. Regarding alternative revenue, he highlighted financial services (credit card, Affirm's Buy Now, Pay Later) and the travel business as ongoing strengths. For media, he noted a two-pronged journey: building capabilities for personalized messaging and proving concept value with suppliers, citing a successful Kimberly-Clark campaign with a 14:1 return on ad spend.

Rupesh Parikh asked about the P&L impact of Costco's incremental operating hours, specifically if it's expected to be a net benefit for the fiscal year, and inquired about new efforts on alternative revenue streams beyond media.

Answer

CFO Gary Millerchip confirmed that the incremental hours are expected to be a net benefit due to positive sales lift and efficient SG&A management by operators. He broadened alternative revenue streams to include financial services (credit card, Affirm), a successful travel business, and a two-pronged media journey focused on building capabilities and proving concept with suppliers.

Rupesh Parikh of Oppenheimer & Co. Inc. asked if the positive drivers for core-on-core margins would continue and whether vendors would reduce prices if tariffs were rolled back.

Answer

CFO Gary Millerchip indicated that some Q3 margin drivers, like commodity deflation, were unique to the quarter and reiterated the company's focus on reinvesting gains into member value. Regarding a potential tariff rollback, he described the environment as too dynamic to predict but stated that Costco's agility and strong supplier relationships would allow it to widen its value advantage regardless of the scenario.

Rupesh Parikh of Oppenheimer & Co. Inc. asked if the positive drivers of core-on-core margin improvement seen in the quarter are expected to continue. He also questioned whether Costco anticipates vendors would reduce prices if tariffs were to be rolled back.

Answer

Executive VP & CFO Gary Millerchip indicated that some margin drivers, like deflation in certain ingredients, were unique to the quarter and that the company's focus is on reinvesting gains to drive top-line growth rather than sustaining short-term margin benefits. Regarding tariff rollbacks, he stated the environment is too dynamic to predict, but emphasized that Costco's buying expertise and limited SKU model provide agility to widen its value proposition for members regardless of the tariff landscape.

Rupesh Parikh sought clarification on the 13-basis-point wage headwind starting in March and asked about new productivity opportunities to help offset the increased wage pressures.

Answer

Executive Gary Millerchip clarified that the net year-over-year headwind is expected to be mid-single digits because the new increase replaces one from the prior year. He affirmed that the company's goal is to fund its commitment to industry-leading wages by continuously finding operational efficiencies and driving labor productivity, as successfully demonstrated in Q2.

Rupesh Parikh of Oppenheimer & Co. Inc. requested more detail on the drivers behind the 17 basis point increase in core margins (ex-gas), specifically the impact of mix and the credit card co-brand program.

Answer

Executive Gary Millerchip clarified that while the overall gross margin was stable, there were several offsetting factors. A major headwind came from gas margins cycling a volatile period from the prior year. This was offset by benefits from improved e-commerce margins, a favorable business mix, and positive net effects from the co-brand credit card program, where incentives received from the issuing bank outweighed the costs of funding member rewards.

Rupesh Parikh asked for an assessment of the health of the Costco consumer and any notable changes in behavior. He also inquired about the company's latest efforts in alternative revenue streams like retail media.

Answer

Gary Millerchip, an executive, responded that quality and value are paramount for members. He noted an encouraging shift to nonfood spending as inflation has dissipated. In food, he sees signs of a shift from dining out to eating at home, with strong growth in fresh categories and lower-cost proteins. Regarding retail media, he described it as a significant long-term opportunity that Costco is on a journey to develop. He emphasized that Costco's approach will be different, reinvesting the vast majority of proceeds to drive top-line growth for CPG partners.

Rupesh Parikh inquired about the innovation pipeline and exclusive brands, specifically asking about management's visibility and sentiment regarding newness for fiscal 2026, following a strong year of innovation in fiscal 2025.

Answer

President and CEO Kecia Steelman expressed strong confidence in the newness pipeline for fiscal 2026, noting that merchants have been diligently developing balanced plans across the portfolio. She emphasized the prioritization of newness and innovation as crucial drivers for the business, with more specifics to be shared in March.

Rupesh Parikh from Oppenheimer & Co. Inc. inquired about the early traction of the 'Ulta Beauty Unleashed' plan, asking if its progress was ahead of schedule or if there were any surprises versus initial expectations.

Answer

President & CEO Kecia Steelman responded that she was proud of the team's focused execution, which drove the better-than-planned Q1 results. She highlighted sharpened in-store execution, improved inventory in-stocks, and more effective marketing with higher earned media value. Steelman also noted that new and exclusive brand launches provided a positive halo effect, reinforcing her confidence in the plan's ability to drive long-term growth.

Rupesh Parikh asked for an update on store unit growth plans and the performance of the Ulta Beauty at Target partnership amid the more challenging retail environment.

Answer

CEO David Kimbell confirmed that new Ulta stores continue to perform well, and the company remains confident in its expansion plans, including its small-format stores. President & COO Kecia Steelman added that the Target partnership is on track to reach 800 locations and is successfully driving new member acquisition and re-engagement, with nearly 4 million guests having linked their loyalty accounts.

Rupesh Parikh of Oppenheimer & Co. Inc. asked how the more aggressive store openings and the revised e-commerce strategy would impact Kroger's baseline capital expenditure (CapEx) spending going forward.

Answer

CFO David Kennerley stated that there would be no immediate change to baseline CapEx spending. Instead, he described it as a prioritization and mix shift, reallocating more capital towards the store program and less to other areas, believing this will improve the company's Return on Invested Capital (ROIC).

Rupesh Parikh asked about Kroger's confidence in sustaining the recent momentum in identical sales (ID sales), which have shown two consecutive quarters above 3%. He also inquired about the improved performance in retail media this quarter, seeking clarification on the driving factors behind this positive trend.

Answer

David Kennerley, EVP & CFO, expressed satisfaction with ID sales performance, noting updated guidance reflects confidence, but cautioned about tougher year-over-year comparisons in the second half, expecting healthy two-year stacks. Ronald Sargent, Interim CEO & Chairman, attributed the momentum to customer response to simpler promotions, lower prices, better service, and improved store execution. For retail media, Mr. Kennerley highlighted a strong offering, positive client response, slight acceleration, and ongoing tweaks to client engagement, viewing it as a significant growth opportunity.

Rupesh Parikh from Oppenheimer & Co. Inc. inquired about the ramp-up of the Express Scripts contract versus expectations and whether any benefits were included in the guidance for the rest of the year. He also asked about quarter-to-date business trends.

Answer

EVP & CFO David Kennerly explained that the impact from Express Scripts (ESI) was minimal in Q1, at less than 10 basis points of sales. He confirmed that due to the unpredictable timing of large commercial contracts, the full-year guidance continues to exclude any potential benefits from ESI. Regarding current trends, Mr. Kennerly stated that the company is pleased with the start to the second quarter and that performance is in line with guidance.

Rupesh Parikh of Oppenheimer & Co. Inc. inquired about the ramp-up of the Express Scripts contract versus expectations and whether any benefits were included in the full-year guidance. He also asked about quarter-to-date business trends.

Answer

EVP & CFO David Kennerly stated that the impact from Express Scripts (ESI) was minimal in Q1, contributing less than 10 basis points to sales. He confirmed that due to the unpredictable timing of large contracts, ESI benefits are not included in the full-year guidance. Regarding current trends, Mr. Kennerly noted that the second quarter had started in line with the company's full-year guidance.

Rupesh Parikh asked about Kroger's potential exposure to new tariffs, particularly on fresh produce from Mexico, noting that this risk is not included in the company's inflation guidance.

Answer

Interim CFO Todd Foley explained that as a primarily domestic retailer, Kroger has limited exposure. While there is some impact on fresh produce from Mexico and Canada, he described it as a 'mid-single-digit effect' and not massive. He added that sourcing teams are proactively working to diversify suppliers to mitigate any potential impact on prices.

Rupesh Parikh of Oppenheimer & Co. Inc. questioned the reasoning behind narrowing the full-year operating profit guidance to the lower end of the previous range. He also asked if management was satisfied with the sign-ups and retention for the Boost membership program, particularly after the addition of Disney+.

Answer

Interim CFO Todd Foley explained the guidance was narrowed to reduce variability with one quarter remaining, noting that strong Q3 pharmacy results were offset by an expectation for tougher Q4 comparisons due to weather and fuel volatility. Chairman and CEO Rodney McMullen added that weaker-than-expected Q3 fuel results impacted the top end of the range. Regarding Boost, McMullen stated they are very happy with the program's high renewal rates and NPS scores but are more excited about the future potential to educate more customers on its value.

Rupesh Parikh inquired if the newly raised CapEx guidance represents a new normal for spending and asked for clarity on the EPS growth cadence between Q3 and Q4.

Answer

Interim CFO Todd Foley clarified the higher CapEx is to accelerate store projects, which could lead to a sustained higher spend level. CEO Rodney McMullen added these investments are performing well. Regarding EPS, Foley projected Q3 would be slightly ahead of the prior year, with Q4 slightly behind on a comparable 52-week basis.

Rupesh Parikh asked about the gross margin outlook for Q4, including expected puts and takes, and the long-term confidence in achieving gross margin improvements from initiatives like retail media, mix shifts, and shrink reduction.

Answer

Donny Lau, CFO, detailed Q3 gross margin expansion, attributing it to higher inventory markups and lower shrink, partially offset by LIFO. For Q4, he anticipates continued gross margin expansion driven by shrink improvement (though less than Q3), private label growth, non-consumables, damage reduction, and supply chain efficiencies, with LIFO as a headwind. Todd Vasos, CEO, expressed strong confidence in long-term gross margin opportunities, citing better-than-expected shrink improvements, significant potential in damage reduction, positive mix shifts from non-consumables and HBA, and the early but promising growth of the DG Media Network.

Rupesh Parikh of Oppenheimer & Co. Inc. inquired about the key learnings from the DoorDash partnership and the potential incrementality of the new Uber Eats partnership for Dollar General's delivery services.

Answer

CEO Todd Vasos reported a 60% year-over-year sales increase through the DoorDash platform and noted the rapid expansion with Uber Eats to 14,000 stores by Q3. He highlighted that their delivery offerings, including a white-label program, are driving incremental sales with larger baskets. He emphasized that the DG Media Network is the linchpin of the digital strategy and that sub-one-hour delivery is a key competitive advantage.

Rupesh Parikh of Oppenheimer & Co. Inc. inquired about Dollar General's confidence in sustaining its same-store sales momentum and whether the full-year guidance implies conservatism after a strong Q1.

Answer

CEO Todd Vasos expressed high confidence, attributing the top-line strength to successful "back to basics" execution, including improved store standards, lower employee turnover, better in-stocks from SKU rationalization, and a sustained influx of higher-income trade-in customers. CFO Kelly Dilts clarified that the updated guidance reflects Q1's outperformance but also incorporates heightened uncertainty around tariffs and consumer spending for the remainder of the year. She noted Q2 SG&A will be pressured by incentive compensation accruals, likely leading to a year-over-year EPS decline for that quarter.

Rupesh Parikh of Oppenheimer & Co. Inc. asked about Dollar General's confidence in sustaining its comparable sales momentum and whether the full-year guidance implies conservatism after a strong Q1.

Answer

CEO Todd Vasos expressed confidence, citing the success of "back to basics" initiatives, including improved store standards, lower employee turnover, better supply chain performance, and SKU rationalization. He also noted the positive impact of trade-in customers. CFO Kelly Dilts explained that the updated guidance reflects Q1's outperformance but also accounts for heightened uncertainty regarding tariffs and consumer spending, noting significant SG&A pressure from incentive compensation is expected in Q2.

Rupesh Parikh asked for an update on store conditions, including inventory and staffing levels, and inquired about remaining opportunities to improve working capital.

Answer

CEO Todd Vasos reported that over 70% of stores meet the company's condition standards, with a goal of reaching 80%, and noted that in-stock levels are at multi-year highs. CFO Kelly Dilts added that strong inventory management drove a 25% increase in cash flow from operations in 2024. She also mentioned plans to pay down $500 million in debt with cash in Q1 2025, further improving the balance sheet.

Rupesh Parikh asked for an initial outlook on fiscal 2025, focusing on puts and takes like incentive compensation and hurricane expenses, and also inquired about the expected CapEx spend given the expanded real estate project plans.

Answer

CFO Kelly Dilts identified incentive compensation, retail salary pressure, and depreciation as expected headwinds for 2025. She projected that capital expenditures would be similar to the current year as a percentage of sales, with investment focused on high-return projects like store remodels.

Rupesh Parikh asked if the updated guidance contains more conservatism than usual and how the consumer has responded to recent and planned promotions compared to historical patterns.

Answer

CFO Kelly Dilts explained the guidance assumes a 'macro neutral to a slight softening' of the consumer, with the low end reflecting Q2's comp rate and the high end assuming some acceleration. She suggested a CAGR from 2019 is a more relevant benchmark. CEO Todd Vasos added that promotional activity ramped up in mid-July with an 'almost immediate' positive response from consumers, particularly through digital channels, giving them confidence in their strategy for the second half.

Rupesh Parikh inquired about the performance of categories where Dollar Tree implemented price increases due to tariff risks and how the company would handle potential tariff relief, specifically whether savings would be passed to consumers or flow to the bottom line.

Answer

CEO Mike Creedon stated that elasticity has been manageable, offset by multi-price mix, and value perception remains intact, citing strong customer response across all income cohorts. Regarding tariffs, he mentioned the global sourcing team is monitoring the situation and will act based on Supreme Court outcomes.

Rupesh Parikh inquired about the performance of categories where pricing was adjusted due to tariff risks and how the company would respond to potential tariff relief, specifically whether savings would be passed to consumers or flow to the bottom line.

Answer

CEO Mike Creedon stated that elasticity has been manageable and offset by the multi-price mix, with the value perception remaining intact across all income cohorts. He referenced the 'Break the Dollar' experience as a proof point for strategic pricing and mentioned that their global sourcing team is actively monitoring tariff developments.

Rupesh Parikh asked about the stage of enacted pricing increases given the current tariff backdrop and how Dollar Tree feels about its price gaps after recent and planned increases.

Answer

CEO Michael Creedon described the pricing actions for current tariffs as being in the 'late inning,' with ongoing work for replenishment and resignage. He stated that customer reception has been 'very well,' as evidenced by their traffic and ticket, indicating satisfaction with the value proposition.

Rupesh Parikh from Oppenheimer & Co. Inc. questioned why Dollar Tree reiterated its full-year guidance instead of raising it, given the strong Q1 comp beat and the forecast for Q2 comps to be at the high end of the annual range.

Answer

CFO Stewart Glendinning explained that while performance has been strong, the company felt it was prudent to maintain the existing full-year range. He noted the decision to guide to the high end for Q2 was to provide transparency that the strong top-line performance is occurring alongside the quarter's anticipated cost pressures from tariffs and investments.

Rupesh Parikh asked about the performance of the 3.0 format stores, inquiring about any positive or negative surprises and the biggest opportunities for further optimization.

Answer

CEO Mike Creedon stated that 3.0 stores continue to perform well, with results improving the longer the format is in place as customers discover the new offerings. He noted that all conversion cohorts from 2024 strengthened in Q4. The biggest opportunity for improvement, he said, lies in operational execution, specifically ensuring a store is fully prepared and staffed for the conversion rather than trying to 'muscle' through it.

Rupesh Parikh asked about any positive or negative surprises observed with the 3.0 store format and inquired about the most significant opportunities to further optimize its performance.

Answer

CEO Michael Creedon reported that 3.0 stores continue to perform well, with results improving the longer the format is in place as customers discover the expanded assortment. He identified the biggest opportunity for improvement in the operational execution of conversions, emphasizing the need to ensure stores are fully staffed and ready before undergoing the change to maximize returns, a key focus for 2025.

Rupesh Parikh from Oppenheimer asked about the significant outperformance of BJ's Wholesale Club's 2025 clubs, with membership counts 25% ahead of plan, and the contributing factors to this success.

Answer

Executive VP, Strategy and Development Bill Werner attributed the success to the strong culture built around the new club program, emphasizing the team's full engagement and continuous learning since 2016. He highlighted the goal of making each new opening the best in company history and expressed confidence in future expansions, including Dallas-Fort Worth and Foley, Alabama, based on the momentum and successful execution of the 2025 class.

Rupesh Parikh from Oppenheimer inquired about the significant outperformance of BJ's Wholesale Club's 2025 class of new clubs, with membership counts 25% ahead of plan, asking for the contributing factors.

Answer

Executive VP Bill Werner attributed the success to the strong culture and engagement of the new club program team, built since 2016, emphasizing continuous practice and learnings. He highlighted the high execution level and strong pre-opening membership and community engagement for the 2025 class, calling it the "best class" opened, which provides confidence for future market entries.

Rupesh Parikh of Oppenheimer & Co. Inc. commented on the strong expense control in Q2 and asked if any part of that performance was unsustainable. He also followed up on whether tariff dynamics have led to any meaningful changes in the GM assortment.

Answer

CFO Laura Felice stated that while she was proud of the Q2 expense control and there was nothing uniquely unsustainable, the new club openings planned for the back half will likely add incremental pressure and slight deleverage, consistent with prior guidance. CEO Bob Eddy addressed the assortment question, clarifying that tariff impacts have not led to 'huge' changes in what they are ordering, but rather in the quantities of those orders.

Rupesh Parikh requested insight into the company's expectations for merchandise margins for the upcoming year and the key factors that could influence them.

Answer

CEO Robert Eddy stated that while Q4 margins were slightly impacted by strategic price investments in key commodities, the company has numerous initiatives to drive margin improvement, including better sourcing, own brands, and supply chain efficiencies. He noted that potential tariffs create some near-term uncertainty, but expressed long-term confidence in the company's ability to manage costs, deliver value to members, and drive margin.

Rupesh Parikh of Oppenheimer & Co. Inc. commented on the strong expense control in Q2 and asked if any part of that performance was unsustainable. He also asked if tariff dynamics have forced any meaningful changes to the general merchandise assortment.

Answer

EVP & CFO Laura Felice stated she was proud of the expense control and that there was nothing uniquely unsustainable in the quarter's results, but noted that new club openings in the back half will add some incremental pressure. CEO Bob Eddy responded that tariff impacts have not led to huge differences in what is being ordered, but rather the quantities in which items are ordered.

Rupesh Parikh of Oppenheimer & Co. Inc. asked about the club relocation strategy, inquiring about the number of potential opportunities and whether these would be incremental to the typical pace of new store openings.

Answer

EVP, Strategy and Development William Werner explained that the company is actively and opportunistically seeking relocation opportunities where market dynamics have changed. He positioned this as part of the broader real estate strategy to 'play offense' and reposition for the future, integrating it within their overall growth plans.

Rupesh Parikh inquired about the club relocation strategy, asking how many opportunities exist and if these would be incremental to the typical annual new store opening plan.

Answer

EVP, Strategy and Development Bill Werner stated that the company is actively and opportunistically looking at its existing store base for relocation chances, particularly where population or retail landscapes have shifted. He framed it as part of a broader strategy to 'play offense' and reposition the fleet for the future, suggesting it is an integrated part of their overall real estate program rather than a separate, incremental count.

Rupesh Parikh inquired about the scale of club relocation opportunities and whether these would be incremental to the company's typical annual new store openings.

Answer

EVP, Strategy and Development Bill Werner explained that the company views relocations as an opportunistic way to 'play offense' and reposition its fleet for the future as markets and populations evolve. The commentary suggests these are strategic decisions made when opportunities arise, rather than a separate, fixed quota that would be purely incremental to the stated new club opening pipeline.

Rupesh Parikh asked for more details on the club relocation strategy, questioning the number of potential opportunities and whether these projects would be incremental to typical new store openings.

Answer

EVP, Strategy and Development, Bill Werner explained that the company is opportunistically looking to relocate clubs in markets where the population or retail landscape has shifted. He framed it as 'playing offense' to reposition the fleet for the future when it makes sense for members and the company, as part of their broad real estate program.

Rupesh Parikh of Oppenheimer & Co. Inc. inquired about the company's expectations for merchandise margins in the upcoming year and the key factors that could influence them.

Answer

CEO Robert Eddy stated that while Q4 margins were slightly below expectations due to price investments, the company will always prioritize member value. He noted that the outlook is clouded by potential tariffs but expressed confidence in the company's ability to mitigate cost increases through sourcing, own brands, and supply chain efficiencies. Over the long term, he remains bullish on driving margin improvement.

Rupesh Parikh asked Helen of Troy's new CEO, Scott Uzzell, for his initial assessment of the company's portfolio, including potential divestiture opportunities. He also inquired about the sustainability of the current earnings base for future growth.

Answer

Scott Uzzell (CEO) expressed enthusiasm for Helen of Troy's brands and the opportunity for a turnaround, noting that divestitures are being evaluated as part of the long-range plan but no specific decisions have been made. Tracy Schuerman (Assistant CFO) clarified a previous revenue outlook comment. Brian Grass (CFO) and Tracy Schuerman (Assistant CFO) indicated that fiscal 2026 includes significant transitory impacts expected to dissipate, providing a foundation for growth in fiscal 2027, though specific guidance was not provided.

Rupesh Parikh inquired about CEO Scott Uzzell's initial assessment of Helen of Troy's brand portfolio, specifically asking about potential divestiture opportunities and his high-level perspective after a few weeks. He also asked if the current fiscal year's earnings base is a fair foundation for future growth, seeking insight into the company's ability to grow off this base in subsequent years.

Answer

CEO Scott Uzzell expressed enthusiasm for the company's brands like Osprey, OXO, and Curlsmith, acknowledging recent challenges but seeing significant future opportunity. He stated that all brands currently show promise and that divestitures are being evaluated as part of the long-range plan, but no specific decisions have been made yet. CFO Brian Grass indicated that specific fiscal 2027 guidance is premature but highlighted significant transitory impacts on fiscal 2026 revenue and expenses that are expected to dissipate, providing a building block for future growth. Assistant CFO Tracy Schuerman agreed, noting anticipated improvements in the second half of the current fiscal year.

Rupesh Parikh of Oppenheimer & Co. Inc. inquired about Helen of Troy's pricing strategy, including the magnitude of planned increases, the categories affected, and the company's assumptions regarding price elasticity in the current economic environment. He also asked for more detail on the expected interplay between gross margins and SG&A for the second quarter.

Answer

CEO Brian Grass explained that price increases will average 7-10% across the portfolio, with a range of 0-15% on specific items, and that the company is using conservative elasticity assumptions. CFO Tracy Schuerman added that pricing is selective by brand and category. For Q2, Schuerman projected gross margin to be slightly lower than Q1 but improved year-over-year, while the SG&A ratio is expected to be in the 40-41% range before normalizing to around 39% in the second half of the year.

Rupesh Parikh asked for a quantifiable dollar amount for the unmitigated portion of the tariff impact, questioned if the company expects positive free cash flow for the year, and sought directional commentary on Q1's top-line performance relative to Q4.

Answer

CFO Brian Grass provided a directional figure, stating the total tariff impact for fiscal 2026 could be over $200 million before mitigation. He confirmed the company 'absolutely' expects to generate positive free cash flow for the full year. Grass also reiterated expectations for a weaker Q1, citing retailers pausing direct import shipments from China to avoid tariffs and headwinds in the company's own China business due to trade tensions.

Rupesh Parikh asked for an update on how sales velocities are performing for brands like OXO and Hydro Flask in their newly gained distribution channels. He also requested assistance in quantifying the carry-over accretion benefits from the Olive & June acquisition into the next fiscal year.

Answer

CEO Noel Geoffroy reported that OXO's new distribution at Walmart has shown strong velocity and expanded household penetration, leading to further opportunities. For Hydro Flask, she noted it's early for Target, but the Costco program saw strong velocity that prompted replenishment orders. CFO Brian Grass advised that to estimate fiscal 2026 accretion from Olive & June, one should annualize the partial Q4 contribution while accounting for its high growth rate and the fact that Q4 is a seasonally softer period for the brand. He reiterated its attractive margin profile.

Rupesh Parikh of Oppenheimer & Co. Inc. questioned the implied softer guidance for the second half of the fiscal year following the Q2 beat. He also asked for details on the strategic efforts and expected timeline to revitalize the underperforming Beauty category.

Answer

CEO Noel Geoffroy explained that the Q2 beat was largely due to a smaller-than-expected negative impact from the Tennessee distribution center issues, which wasn't significant enough to warrant raising the full-year guidance. On the Beauty category, Geoffroy detailed a multi-pronged approach, including foundational brand-building work, new leadership, retailer collaboration, and targeted innovation like Curlsmith's new products and Revlon's value-focused marketing campaign. She indicated these steps are already showing early results but acknowledged that a full turnaround takes time.

Rupesh Parikh inquired about the long-term potential size of the Get Real fresh/frozen business, asking for insights into the characteristics of initial customers and whether the launch is attracting new customers to the franchise.

Answer

Sumit Singh, CEO & Director, Chewy, estimated the fresh/frozen TAM to grow to $8B-$12B in several years, with Get Real aiming for a share commensurate with Chewy's industry position. He reported that 70% of initial Get Real customers are existing, and 30% are net new, with expected NESPAC exceeding $800 for toppers and $2,500 for full meal customers, highlighting the high gross margin potential.

Rupesh Parikh inquired about the long-term potential size of Chewy's Get Real and fresh frozen business, the characteristics of its initial customers, and whether the launch is attracting new customers to the franchise.

Answer

CEO Sumit Singh estimated the fresh and frozen category TAM at $3 billion to $4 billion today, projected to grow to $8 billion to $12 billion in several years, with a current mid-teens growth rate. He stated Chewy aims for a market share commensurate with its overall industry position, leveraging existing capacity and a one-day network for high gross margin potential. Singh reported that in the early weeks, approximately 70% of Get Real customers are existing Chewy customers, and 30% are net new. He expects these customers to have high NESPACs, ranging from over $800 for toppers to over $2,500 annually for full meal customers, often prone to Health & Wellness purchases.

Rupesh Parikh inquired about the long-term potential size of the Get Real and fresh/frozen business, the characteristics of initial customers, and whether the launch is attracting new customers to Chewy.

Answer

CEO Sumit Singh estimated the fresh/frozen TAM at $3 billion-$4 billion today, growing to over $8 billion in several years at mid-teens rates. He expects Get Real to achieve a meaningful share commensurate with Chewy's overall industry position, leveraging existing capacity and a one-day delivery network for high gross margins. Initial customer data shows approximately 70% are existing Chewy customers and 30% are net new, with expected NESPAC of over $800 for toppers and over $2,500 for full meal customers.

Rupesh Parikh requested more color on the performance of the hard goods category and its future expectations. He also asked about Chewy's exposure to potential tariffs, particularly from China.

Answer

CEO Sumit Singh noted that hard goods performance is improving due to both industry stabilization and Chewy's own efforts in assortment expansion and site experience. Executive David Reeder confirmed that hard goods have grown year-over-year for two consecutive quarters. Regarding tariffs, Reeder stated that Chewy's exposure is low, as the vast majority of its net sales are from domestically sourced products, with only a small portion of hard goods sourced from China.

Rupesh Parikh of Oppenheimer & Co. Inc. asked about the monthly sales trends during the quarter and sought more detail on the performance of the hard goods category, which reportedly outpaced consumables.

Answer

CFO David Reeder stated that monthly sales trends were stable and predictable, consistent with expectations, due to the high percentage of recurring Autoship revenue. He clarified that the hard goods category has stabilized and is now broadly flat quarter-to-quarter, which management views as a positive signal of a normalizing market rather than it outpacing consumables.

Rupesh Parikh from Oppenheimer & Co. Inc. asked where Chewy believes it is gaining market share, given the strong, broad-based momentum in its top-line results.

Answer

CEO Sumit Singh stated definitively that Chewy is gaining market share. He provided a calculation showing that with the pet industry growing 3-4%, Chewy is now capturing approximately $0.50 of every new dollar spent online in the category. This represents an increase from the $0.40 to $0.42 share capture rate the company had cited in the past.

Rupesh Parikh of Oppenheimer & Co. Inc. asked where Chewy believes it is gaining market share and whether the sources of these gains have changed compared to recent quarters.

Answer

CEO Sumit Singh stated unequivocally that Chewy is gaining share. He provided a calculation suggesting that Chewy is now capturing approximately $0.50 of every dollar that moves online in the pet category, an increase from the $0.40 to $0.42 range the company had mentioned in the past, indicating an acceleration in share capture.

Rupesh Parikh of Oppenheimer & Co. Inc. asked where Chewy believes it is gaining market share, given the strong, broad-based momentum in its top-line results.

Answer

CEO Sumit Singh provided a direct calculation, estimating that with industry growth around 3-4%, Chewy is capturing approximately $0.50 of every dollar that moves online in the pet category. He noted this is a significant increase from the $0.40-$0.42 figure cited in the past, indicating an acceleration in market share gains.

Rupesh Parikh of Oppenheimer & Co. Inc. asked for clarification on where Chewy is gaining market share and whether the sources of these gains have changed compared to recent quarters.

Answer

CEO Sumit Singh stated there is "no doubt" Chewy is gaining share. He provided a calculation suggesting that Chewy is now capturing approximately $0.50 of every new dollar spent online in the pet category, an increase from the $0.40 to $0.42 figure cited in the past, indicating an acceleration in market share gains.

Rupesh Parikh from Oppenheimer & Co. Inc. asked where Chewy is gaining market share and whether the sources of these gains have changed compared to recent quarters.

Answer

CEO Sumit Singh stated unequivocally that Chewy is gaining share. He provided an analysis suggesting the company is now capturing approximately $0.50 of every dollar that moves online in the pet category, which is a notable increase from the $0.40 to $0.42 figure the company had cited in the past.

Rupesh Parikh of Oppenheimer & Co. Inc. asked where Chewy believes it is gaining market share and if there have been any changes to this trend compared to recent quarters.

Answer

CEO Sumit Singh stated unequivocally that Chewy is gaining market share. He provided a calculation suggesting that Chewy is now capturing approximately $0.50 of every dollar that moves online in the pet category, an acceleration from the $0.40-$0.42 figure mentioned in the past. This indicates that the company's share gains are increasing.

Rupesh Parikh of Oppenheimer & Co. Inc. asked why the full-year guidance remains wide despite Q2 performance and whether executing on the new CEO's key priorities would require additional labor investments.

Answer

EVP & CFO Jim Lee stated that maintaining the guidance range is a prudent and cautious approach given ongoing consumer and tariff uncertainty. Incoming CEO Michael Fiddelke addressed the labor question by describing a strategy to change how labor is used, not just add more. He cited a successful test where certain stores specialize as fulfillment hubs, improving efficiency and the in-store experience, a model now expanding to more markets.

Rupesh Parikh questioned the strategy for improving in-store comparable sales and traffic, and also asked for the company's current assessment of its price gaps and overall price positioning.

Answer

CEO Brian Cornell emphasized a focus on 'good retail fundamentals,' including in-stock reliability and a great in-store experience. CCO Rick Gomez added that Q2 plans include 10,000 new items and major launches like Nintendo Switch 2 to drive traffic. Regarding pricing, Gomez stated they are 'comfortable' with current price gaps and view value holistically, highlighting new Target Circle 360 benefits as a key value driver beyond just price.

Rupesh Parikh asked about the key tactics being employed to drive stronger in-store traffic and how the company assesses its current price gaps and overall price positioning in the market.

Answer

CEO Brian Cornell, CCO Rick Gomez, and COO Michael Fiddelke all weighed in. Cornell stressed a focus on 'good retail fundamentals' like in-stocks and a great store experience. Gomez detailed plans to build on Q1 bright spots with newness (10,000 new summer items), major launches like Nintendo Switch 2, and in-store events. On pricing, Gomez stated they are 'comfortable' with current price gaps but view value holistically, highlighting the new Target Circle 360 benefit of no markups on Shipt marketplace orders.

Rupesh Parikh inquired about management's latest outlook on the recovery timeline for discretionary spending and whether they anticipate a better environment in 2025.

Answer

CCO Rick Gomez noted that while discretionary categories remain challenged, there are bright spots. He cited double-digit growth in the 'All in Motion' apparel brand and a strong consumer response to newness in Home from partnerships like Hearth & Hand. He believes as weather turns colder, apparel sales will improve. CEO Brian Cornell added that while these categories represent over 50% of the business, the company will plan cautiously for 2025 to stay in step with the consumer and macro trends.

Rupesh Parikh of Oppenheimer asked for the expected Q2 revenue contribution from Rhode and whether the acquisition would be dilutive to Q2 margins. He also inquired about the momentum of the international business into Q2.

Answer

Senior VP & CFO Mandy Fields declined to provide specific Q2 revenue figures for Rhode but confirmed it is expected to be accretive for the full year. She clarified that Rhode's SG&A expenses are included in Q2 financials without the benefit of its initial Sephora sell-in revenue, which occurred pre-close, thus impacting Q2 margins. For international, she noted that momentum continues but reminded that the first half of last year had more sell-in activity.

Rupesh Parikh of Oppenheimer & Co. Inc. inquired about the sourcing and production capacity for the Rhode brand and whether mitigation efforts would fully offset the stated $50 million tariff exposure.

Answer

Chairman and CEO Tarang Amin expressed high confidence in Rhode's excellent supply base in Italy and South Korea, stating it has ample capacity for the Sephora launch and future growth. SVP & CFO Mandy Fields declined to quantify the offset from mitigation efforts, deferring details until there is more certainty on tariffs.

Rupesh Parikh asked about the performance of the Naturium brand at Ulta Beauty and inquired about the company's plans for further distribution of the brand.

Answer

CEO Tarang Amin reported that the company is very pleased with Naturium's launch at Ulta Beauty, which includes a full assortment of facial and body care. He stated that they will continue to explore further expansion opportunities for Naturium both domestically and internationally, highlighting its recent launch into Boots in the U.K. as an example of this strategy.

Rupesh Parikh from Oppenheimer & Co. Inc. asked about the drivers of the company's quarter-to-date momentum and inquired about the company's value proposition strategy now that bonus packs have been phased out.

Answer

CEO Howard Friedman attributed the momentum to a 'flywheel' effect of expanded distribution, increased marketing, and strong in-store execution. Regarding value, he stated that the bonus packs ended in April without a negative sales impact and that the company continues to compete effectively across the entire price ladder with a strong price-pack architecture, seeing strength across its portfolio without needing major strategic tweaks.